Megaupload bosses arrested in New Zealand raid

February 2012

COPYRIGHTInternet, film, television

Reuters report that Kim Dotcom (Kim Schmitz, a 37 year old German national) the Megaupload boss, has been arrested by police in New Zealand and that the US Government has shut down the content sharing website which recently featured on this Blog. It can hardly have escaped anyone’s notice that the actions come against the background of heated debate over the proposed SOPA (Stop Online Piracy Act) and PIPA (Protect IP Act) legislation in the USA but Reuters report that a US Justice Department official said the timing of the arrests was not related to the battle inside and outside Congress. Schmitz lives in New Zealand and it appears that some 70 police officers raided 10 properties and also arrested the website’s chief marketing officer, Finn Batato, 38, chief technical officer and co-founder Mathias Ortmann, 40 (both German nationals) and Dutch national Bram van der Kolk, 29, who is also a New Zealand resident. Alongside these arrests, NZ police seized several million dollars worth of assets and NZ$10 million from financial institutions. The Organised & Financial Crime Agency New Zealand said they would work with US Authorities to enable extradition proceedings to proceed. Those arrested have been remanded in custody after a court hearing in Auckland.

The indictment accuses seven individuals and two corporations – Hong Kong based Megaupload Limited and Vestor Limited — of costing copyright holders more than $500 million in lost revenue from pirated films and other content. Megaupload has boasted of having more than 150 million registered users and 50 million daily visitors, according to the indictment. At one point, it was estimated to be the 13th most frequently visited website on the Internet.

And critics of the quickly showed their opposition to the shutdown of Megaupload.com, with hackers attacking the public websites of the Justice Department, the world’s largest music company Universal Music, and the two big trade groups that represent the music and film industries, the RIAA and the MPA.

In the week following the arrests Schmitz was denied bail by a court in New Zealand after prosecutors said there would be a real risk that he would flee New Zealand and evade extradition to the United States to face criminal charges. Schmitz’s defence lawyers had argued that his passport had been seized, bank accounts frozen and his size (he is VERY large) made it unlikely he would be able to evade immigration officials. But prosecutors argued that the MegaBoss may well have other passports and other bank accounts, and that he had a history of evading criminal charges. Judge David McNaughton agreed with the prosecution, saying that “with sufficient determination and financial resources, flight risk remains a real and significant possibility which I cannot discount and bail is declined” adding that the unlicensed shotguns which were found at Schmitz rented mansion (he was apparently located by New Zealand Police locked in the mansion’s panic room with a shotgun) suggested criminal connections, who could possibly aid an escape from the country. Schmitz holds joint Finnish and German nationality and it was feared he would escape to Germany, who perhaps might be less to hand over one of their own citizens to the US authorities. The bail decision will be appealed.

Schmitz will now be held in custody until February 22nd. The other three MegaUpload team members arrested in New Zealand last week were also remanded in custody, with each requesting separate hearings to present arguments to attempt to secure bail and subsequently two did secure bail subject to electronic tagging and other conditions. Mystery remains about the role Swiss Beatz, Alicia Key’s rapper and producer husband, played in the whole Mega business where it was thought he was CEO. US authorities have not named Beatz as a suspect, and cyber commentators claim the title was a ‘courtesy’ title.

In the wake of the arrests, a number of websites have taken steps to block unlicensed and infringing content with two, Filesonic and Fileserver, putting blocks in place so users can now only download content they themselves uploaded.